Champaign-Urbana News Agency, Inc. v. J. L. Cummins News Co.

SWYGERT, Circuit Judge,

dissenting in part.

Although I recognize that AAFES is an instrumentality of the United States, I do not agree that the second trial judge was correct to conclude that AAFES enjoys sovereign immunity from prosecution under the antitrust laws. It is agreed that there are no cases which have addressed the issue of immunity from the antitrust laws for post exchanges, which as part of the Department of Defense are instrumentalities of the federal government. There are, however, cases dealing with the antitrust laws in relation to instrumentalities of both state government and the District of Columbia, and there are also cases which have confronted the issue of immunity for post exchanges in other than the antitrust context. Both lines of cases require, in my view, a result different from that reached by the majority.

In Parker v. Brown, 317 U.S. 341 , 63 S.Ct. 307 , 87 L.Ed. 315 (1943), the Supreme Court held that California, whose agricultural pro-ration program arguably violated the antitrust laws, was immune from liability because the antitrust laws were not intended to “restrain state action or official action directed by a state.” 317 U.S. at 351 , 63 S.Ct. at 313 . Despite that holding, the progeny of Parker v. Brown have made it clear that “it is not every governmental act that points a path to an antitrust shelter.” Woods Exploration & Pro. Co. v. Aluminum Co. of Amer., 438 F.2d 1286, 1294 (5th Cir. 1971). See California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97 , 100 S.Ct. 937 , 63 L.Ed.2d 233 (1980); City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389 , 98 S.Ct. 1123 , 55 L.Ed.2d 364 (1978); Cantor v. Detroit Edison Co., 428 U.S. 579 , 96 S.Ct. 3110 , 49 L.Ed.2d 1141 (1976); Goldfarb v. Virginia State Bar, 421 U.S. 773 , 95 S.Ct. 2004 , 44 L.Ed.2d 572 (1975).

In City of Lafayette v. Louisiana Power & Light Co., the Supreme Court refused to find immunity from antitrust liability for a city which owned and operated an electric utility system, although the city was an instrumentality of the State. Because the city was performing a business rather than a governmental function, the Court found the contention that its goal was not private profit but public service to be “only partly correct. Every business enterprise, public or private, operates its business in furtherance of its own goals” and with “impact . on other individuals and business enterprises with which they inter-relate as purchasers, suppliers, and sometimes . as competitors.” 435 U.S. at 403 , 98 S.Ct. at 1132 . The Court concluded that the city’s business enterprise was not exempt under Parker because it was neither anti-competitive conduct engaged in as an act of government by the State as sovereign, nor an act of a subdivision of the State pursuant to a definite state policy to displace competition with regulation or monopoly public service.

There is much similarity between our case and City of Lafayette . AAFES, like the city, is an instrumentality of the Government but is not itself the sovereign. And, like the city, AAFES is engaged in an enterprise which is proprietary rather than governmental. AAFES operates a highly profitable retail chain store in which the Government has no financial interest. Its patrons include a great many civilians and even private organizations. Its suppliers are private concerns. That AAFES’ operation, like the city’s, impacts on other individuals and business enterprises must be obvious from the fact that in 1969 AAFES ranked third behind Sears, Roebuck & Com *694 pany and J.C. Penney Company with sales in excess of $3.5 billion. 1

Ours is not the kind of case discussed in City of Lafayette where a subdivision of the Government was. violating the antitrust laws pursuant to a government policy to displace competition with regulation or monopoly public service. AAFES’ own manual, “Exchange Service Procurement Instructions,” emphasizes compliance with the antitrust laws and requires an AAFES contracting officer who receives a proposal designed to eliminate competition to report that proposal to his superiors. For the information of those contracting officers, the manual goes on to list examples of “practices that tend to eliminate competition or restrain trade and that may evidence violation of antitrust laws.” 2 Unlike the majority, I do not read the regulations to require AAFES to contract at the lowest price regardless of the impact on competition. That reading results in the inconsistency which the majority strains to explain. The more logical interpretation is that the regulations require lowest price contracting consistent with the antitrust laws. In Penn Dairies v. Milk Control Comm’n, 318 U.S. 261, 275 , 63 S.Ct. 617, 623 , 87 L.Ed. 748 (1943) the Supreme Court stated that although the Government was required to contract with the lowest responsible bidder, immunity from state regulation would not be inferred “in the absence of some evidence of an inflexible Congressional policy requiring Government contracts to be awarded on the lowest bid despite noncompliance with state regulations otherwise applicable.”

Although City of Lafayette involved a state rather than a federal entity, the same rationale has been applied to a creation of the United States Congress. In Hecht v. Pro-Football, Inc., 444 F.2d 931 (D.C.Cir. 1971), cert. denied, 404 U.S. 1047 , 92 S.Ct. 701 , 30 L.Ed.2d 736 (1972), the issue was whether a District of Columbia armory board, created by an act of Congress to develop and administer a stadium for athletic events, was immune from the antitrust laws. The District of Columbia Circuit analyzed cases involving both state and federal governmental action and concluded that although no antitrust statute could restrict the United States Government in directing action in complete contradiction to antitrust policy, to hold that any valid governmental action is immune “is a much too talismanic approach where scrupulous distinctions are called for.” 444 F.2d at 934 . Despite language in the federal statute authorizing the armory board to act “without regard to any other provision of law,” the court determined that Congress did not intend to exempt the stadium enterprise from compliance with the antitrust laws because it was “in the nature of a private venture.” 444 F.2d at 946 . In addition, the requirement that certain contracts not be entered into without competitive bidding was evidence that the board was not to operate in disregard of the antitrust laws. AAFES’ retail operations are also in the nature of a private venture, and its own manual requires compliance with the antitrust laws.

Before today no court had decided whether a post exchange’s retail operations were immune from the antitrust laws, but the Supreme Court had determined that post exchanges do not enjoy blanket sovereign immunity. At issue in Paul v. United States, 371 U.S. 245 , 83 S.Ct. 426 , 9 L.Ed.2d 292 (1963) was whether California could enforce its minimum wholesale price regulations with respect to milk sold at military installations in the state. The Court held that milk used for strictly military consumption or for resale at commissaries, which was purchased with appropriated funds, was immune from state regulation, but that milk for resale at post exchanges, which was purchased with nonappropriated *695 funds, was not immune. The Court found “no conflicting federal policy concerning [post exchange] purchases and sales from nonappropriated funds . . . .” 371 U.S. at 269 , 83 S.Ct. at 440 . The majority tries to distinguish Paul by noting that it was an issue of state versus federal jurisdiction that was ultimately dispositive, namely, whether the state regulation was in effect when the United States acquired the particular tracts of land involved. That issue (which was remanded to the district court) is not relevant in our case, which does not involve state law. But highly relevant to the facts before us is the issue that was decided by the Court-that no federal policy immunized a post exchange in its retail operations from compliance with state economic regulations.

In light of the Supreme Court’s holding in Paul that as a matter of federal policy, post exchanges, which operate with nonappropriated funds, are not immune from state economic regulation, it is indeed anomalous for this court to hold that post exchanges, operating as always with nonappropriated funds, are immune from federal economic regulations. 3 The antitrust laws, in particular,

further policies so basic to our social structure that-in the absence of unequivocal exemption therefrom, either by specific statutory language or by a purpose to enforce other policies of equal or greater importance-it [is] irrational to imply that Congress intended to authorize the conduct they proscribe.

Hecht v. Pro-Football, Inc., 444 F.2d at 945 .

I would'hold that AAFES does not enjoy immunity from antitrust liability. Accordingly, I would reverse and remand this case for trial.

. There is no suggestion that its impact has lessened since that time. See majority opinion at 683.

. That the receipt of a beneficial discount not offered to other buyers is not among the exam-pies given is of no moment, given the Manual’s explicit statement that possible antitrust violations “include but are not limited to” those listed.

. It is worth noting that any recovery by CU would not impinge on the federal treasury.